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Comment by dangero | Hacker News Reader

This fine of $250,000 to Wealthfront means that their violations were 100% worth it. Their fund is 11 billion+ and they got an advantage over competitors by posting testimonials. SEC rules are very clear on this point and at the time other robo compliance officers were lamenting, “I don’t understand how they are able to do that legally.”

Well, guess what? They weren’t, but they took it as a calculated risk and the SEC announced they made the right choice when this fine was announced years later.

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I think you’re overestimating the revenue an asset manager makes with $11b assets under management (AUM).

They aren’t a hedge fund (no profit sharing) and take .25% in fees a year. $11b *.25% is only $27.5m. Hardly a unicorn scale business IMO unless they are pitching investors they’ll get to Blackrock scale (trillion in AUM). Personally I don’t see it. Switching cost is big for existing clients but new clients have a bunch of Robo options now including free ones offered by Schwab, big banks, etc.

For some perspective, after college I worked for an investment fund with around $3b AUM with around 7-8 full time staff with a similar fee structure...it was basically a nice lifestyle company for the two founders.

https://www.bloomberg.com/news/articles/2018-03-23/wealthfro...

This article says 500 Million valuation last year, so halfway to a unicorn.

I’m saying I don’t believe whatever private valuation they have. Wealth management is a lifestyle biz at best unless you get to Blackrock scale. I believe that is what they are pitching investors to get whatever valuation they have now but I am extremely bearish on these companies. Robo investing has been largely commoditized and AUM will inevitably tank with the next recession.

What is a lifestyle business?

"lifestyle business" is a phrase made up by silicon valley wannabes to describe businesses that "only" generate a large enough profit for the owners to be millionaires instead of billionaires.

The fine probably has more to do with paying the costs of the SEC than punishing Wealthfront.

Regulatory actions don't happen in a vacuum and they aren't forgotten. Repeat actions don't necessarily get the same fine, and additional consequences (like more scrutiny for approval, more intense audits, etc) can come from ignoring regulations.

But also remember that these are large organizations being regulated in many many different and often vague ways. Violations happen and are dealt with.

I believe you but why is wells fargo able to fuck over consumers infinite times without consequences? Where are the “additional consequences?”

Wells Fargo the bank has fucked over consumers infinite times. Thats a different regulator - CFPB. And the CFPB has been almost completely dismantled under Trump.

Wells Fargo did not start fucking over their customers in January 2017.

Heck, they probably saved more than that over the years just by failing to implement the compliance program. I can’t imagine such a program would cost less than 250k to implement over three years. So they broke even on this deal before you even factor in ill-gotten gains.

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That intern got a good recommendation!

Look how I'm living now

Series F around the corner now

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